Posts Tagged ‘Dollar’

Gold and silver might have further to fall in the near term, but market bulls expect the retreat to offer investors who missed the first-half 2016 precious metals’ rally a strong buying opportunity. There are many undeniable and solid reasons to support this view. Here are the major factors that will ensure that investments in gold and silver remain attractive.

Today, Sept. 30, is when the IMF officially adds the Chinese yuan to its basket of currencies comprising its special drawing right (SDR). It has enormous long-term implications for the dollar. Does that mean the dollar becomes worthless overnight? Of course not. This is a development with long-term implications, and that’s the point — the dollar will die — but with a whimper, not a bang.

What month is the great menace for markets? September… What could possibly go wrong? Turns out the 30 days ahead are peppered with land mines that could go off with…detonative effects on the market. One of them is Sept. 21. The markets have most definitely not “priced in” a rate hike. It will sell off violently if the Fed goes ahead and raises rates.

After coming under pressure on Friday and dipping to 8-week lows, silver prices gained some respite on Monday with a retreat in US bond yields helping to cushion the risk of further short-term selling. Latest COT data recorded a further decline in long non-commercial silver positions to over 82,000 contracts from 85,000 the previous week & the lowest reading since June.

If you think of gold, the only way gold loses is if normal business and private sector cycles come back. If that is the case, gold goes back 100 dollars per ounce. The other outcomes, deflation, stagflation, hyperinflation are good for gold. So gold wins in three out of four scenarios, but none of the three are particularly appealing. Here is why.

Gold and silver are going insane right now, thanks in large part to the weaker U.S. dollar. Year-to-date, palladium is up 7%, platinum 19%, gold 21% and silver 25%. A correction at this point would be healthy, but looking ahead, this rally appears to have legs. It’s clear that sentiment in precious metals has shifted dramatically, giving the group’s new-found momentum.

By trading physical gold in renminbi, China is slowly chipping away at the dominance of US dollars. Gold, silver, and petroleum are the three US dollar based commodities that China wants most control of, according to Bocom strategist Hao Hong but “gold in particular is one of the commodities that China is hoarding very hard.”

Deutsche Bank revealed that gold and silver markets were fraudulently manipulated to protect the dollar. The geo-political gambit by China against the dollar is now underway in undermining the dollar’s foundation by taking over global gold pricing. Chances are high that within weeks we could see the reserve currency devalue precipitously, or at worst, collapse altogether.

US dollar’s serious breakdown, which results from the NIRP move in Japan & the realization that this makes further rate rises in US much less likely, coupled with growing pressure for global QE to beat back the mounting forces of deflation mean that massive and widespread inflation is not far. While this is obviously not good news for the average housewife, what could be better for gold?

For better or worse, the digital economy is here to stay. It can be mostly for the better. Electronic gold and silver payments using innovations like BitGold and the Gold Standard Society’s Digital Gold 2.0 may prove in the future that free-market hard money is viable for everyday transactions. All it will then need is the right to compete directly with the U.S. dollar as legal tender.

The dollar has historically appreciated before the first hike and typically has depreciated afterwards & may not strengthen further. China’s money supply far exceeds that of other developed nations. Bloomberg Intelligence noted this presumed spending power seems to indicate that China still has plenty of room for additional gold demand.

The Bloomberg Commodity Index is set for its worst year since the financial crisis, plunging 23 percent. It’s not just the metals though: crude oil also started the session off on the wrong foot, following this weekend’s comments from Venezuela that oil prices may drop to as low as the mid-$20s a barrel unless OPEC takes action to stabilize the market.

It’s not that difficult to predict that the next global financial crisis will arise not in the banking sector but in a market that’s beyond the reach of central banks.That is, printing $1 trillion and promising to “do whatever it takes” won’t fix what’s broken. It seems increasingly likely the next Global Financial Meltdown will arise in the FX/currency markets.

It’s tempting to see similarities in last week’s global stock market mini-crash and the monumental meltdown that almost took down the Global Financial System in 2008-2009. The dizzying drop invites comparison to the last Bear Market that took the S&P 500 from 1,565 in October 2007 to 667 on March 9, 2009. Here are a few of the differences.

Is gold reasonably priced? Too high? Too low? Who knows? But we wouldn’t worry about it. Either the price of gold is too high… or too low. How’s that for a helpful analysis? It depends on how you adjust for inflation, which is far from an exact science. But had gold prices kept up with UAW hourly wages, it would be priced at about $2,485 today.

There is “something” missing beyond just the recovery economists were so sure the gold price crash was foretelling. Normalizing both economic & financial conditions would mean interest rates rising back to where they were pre-crisis, as “inflation” picks up. Neither of these is evident in the 2 years since gold prices crashed.

China IS acquiring thousands of tons of GOLD & creating new multilateral lending institutions. China WILL announce an upward revision in its official gold holdings in sometime. But the reasons for the acquisition of gold & the updated disclosures, if they happen, are NOT the ones the blogosphere believes. Herein is the Truth.

If you add all this up – all the forward guidance, all the dates, all the targets, the currency wars, operation twist, all the flavors of QE, 15 separate fed policies in 5 years, that tells you, you don’t know what you’re doing. You’re making it up as you go along. So people should have no confidence in the Fed. That’s for starters.

Over the last few years, Germany, the Netherlands, France, Belgium, Austria, Poland, Ecuador, Finland, Switzerland, Venezuela & Romania have either formally requested repatriation of their gold or are in discussions with the Fed about it. Something huge must of happened in the last few years to prompt such action.

Why are we bombarded daily with negative psyops regarding gold & for the last couple of years, has gold price suppression been so openly blatant & fierce? Its ALL about the dollar & privileges of issuing the reserve currency, namely the US ability to hang on to this privilege. Rest of the world knows what gold really is, it is money.